EURIBOR OPTIONS: Latest Options

TD Securities note that “the MPC's preferred wage measure rose 8.2% y/y in the three months to June (MPC forecast 7.6%). This comes despite the two-month rise in the unemployment rate (from 3.8% to 4.2%) being the fastest since the GFC (ex-COVID).”

• “The surprise in wages alone sets a minimum of a 25bps hike in September. Notably, the ONS also said that June wage data would be revised up further next month. While this might not affect core wages (it's due to NHS & seasonal factors), it will still matter on the margin.”
• “While inflation came in at 6.8% y/y as the MPC expected, the all-important services inflation reading came in stronger, at 7.44% (MPC forecast of 7.25%). Airfares and hotels contributed to this upside surprise, as did regulated social housing rents (which the MPC may look through).”
• “The case for 50bps is looking very tempting, and any further upside surprise to the above data in September could cement that outcome. We continue to expect a terminal rate of 5.75% reached in November, but risks that they achieve this by September are growing.”

Gilt futures unwind the uptick that came at the open.

• That leaves the contract -10 after a brief showing through yesterday’s high.
• The major UK cash benchmarks run 1.5-3.0bp cheaper as the front end leads the move.
• Participants are weighing up the lead from the Asia-Pac bid in U.S. Tsys (driven by China worries) against slightly firmer than expected domestic CPI, which included higher services inflation.
• SONIA futures sit -5.5 to +1.5 through the blues, twist flattening. Contracts trade at/near session lows.
• BoE-dated OIS terminal policy rate pricing moves back above 6.00% after a show below post-CPI.

• RES 4: 1.3655 High May 26 and a key resistance
• RES 3: 1.3585 High Jun 1
• RES 2: 1.3523 76.4% retracement of the May 26 - Jul 14 downleg
• RES 1: 1.3510 Intraday high
• PRICE: 1.3500 @ 08:07 BST Aug 16
• SUP 1: 1.3413 Low Aug 11
• SUP 2: 1.3351 20-day EMA
• SUP 3: 1.3320 Low Aug 4
• SUP 4: 1.3266 Low Aug 2

USDCAD short-term conditions remain bullish and the pair is trading higher. Attention is on 1.3523, a Fibonacci retracement point. Clearance of this level would strengthen current bullish conditions and pave the way for a climb towards 1.3585, the Jun 1 high. Initial firm support to watch is 1.3351, the 20-day EMA. A short-term pullback would be considered corrective and this would allow an overbought condition to unwind.